Nepal’s Non-Life Insurers Tested to the Limit

When fires swept through Kathmandu on eptember 8 and 9, engulfing commercial blocks, arkening government offices, torching private ehicles and shattering glass panes across the ry witnessed the raw human drama of the Gen Z protests. The insurance industry saw something else: the beginning of the largest claims cycle in its history.

Losses mounted almost instantly. By the time surveyors reached the first batch of smoldering shop fronts, damage to insured properties alone was already being counted in the tens of billions of rupees. The shock was swift, but it marked only the opening chapter. Three weeks later, heavy rains triggered floods and landslides across several districts, further straining a sector already carrying unprecedented obligations. Together, the two events generated more than Rs 27 billion in claims, Rs 23.46 billion from the protests and Rs 3.78 billion from the floods and landslides. It was an extraordinary concentration of liabilities in just a few weeks. For Nepal’s 14 non-life insurers, already dealing with falling interest income and limited domestic investment, these losses became a pressure test unlike any in recent memory.

“It was destruction on an extraordinary scale,” said Sanchit Bajracharya, CEO of Prabhu Insurance, who spent the first 72 hours after the protests coordinating teams across the country. “There was hardly a place left untouched. What this unrest has clearly demonstrated is the importance of insurance.”

The industry’s balance sheets told the same story. By mid-October, 12 of the 14 non-life insurers were in the red. Several companies that had posted healthy profits a year earlier reported steep losses. Reinsurance reimbursements, which normally covers up to 65% of claims, had yet to arrive. Insurers  found themselves having to honor massive liabilities upfront while waiting for reinsurers to release their share.

That tension between immediate domestic payouts and delayed international support has become the defining challenge of this year’s insurance cycle. It has exposed long-standing vulnerabilities in Nepal’s non-life sector and opened a wider debate about risk, pricing, public awareness, and the future of insurance in a country where most households still insure only when compelled.

However, even under pressure, the first quarter of the 2025/26 fiscal year showed signs of resilience. Premium collection grew by 11% percent, micro-insurance expanded its footprint, and property-insurance inquiries started increasing. The sector is bruised, but not broken. As with every crisis, new patterns may now be emerging.

The immediate impact of the twin shocks was visible in the quarterly financial statements. Only Prabhu Insurance and National Insurance reported profits in the first quarter, the rest slipped deep into losses.

Some swings were sharp. Rastriya Beema Company fell from a Rs 156.57 million profit to a Rs 99.5 million loss. Shikhar Insurance swung from Rs 115.23 million in profit to a Rs 158.58 million loss. Neco Insurance, once comfortably profitable, reported a Rs 83.13 million deficit.

Profitability Under Pressure

Last fiscal year's financial statements show a broad contraction in the profitability of Nepal’s non-life insurance sector. In 2024/25, aggregate net profit dropped to Rs 4.163 billion, a sharp 28% decline from Rs 5.852 billion in the previous year. Elevated claim payouts, particularly from last year’s floods, drove the decline.

Still, a few insurers managed to grow their bottom line. Siddhartha Premier Insurance remained the industry’s top performer, posting  Rs 713.1 million in profit—a 3.54% annual increase. Himalayan Everest Insurance and Shikhar Insurance also recorded modest gains of 5.89% and 1.65%, respectively.

A notable positive outlier was Sanima GIC Insurance, which expanded profit by 10.13% to Rs 350.3 million. Nepal Insurance reported a 4.29% increase, while Prabhu Insurance stood out with an exceptional 39% jump in profit, suggesting either one-off gains or a strong turnaround. NLG Insurance also continued its steady rise with 9.66% growth.

But the sector’s underlying stress appears in the numbers on the other side. Six insurers saw profits contract. Rastriya Beema Company’s profit fell from Rs 627.3 million to Rs 427.6 million. Sagarmatha Lumbini Insurance and IGI Prudential Insurance recorded drops of 12% and 27%, respectively. United Ajod Insurance also posted a 12% decline, pointing to a sector trend of weakened underwriting profitability.

The most significant erosion occurred at Oriental Insurance where profits collapsed by 86%, indicating heavy claim exposure or valuation adjustments. National Insurance moved into a deep loss, reporting a Rs 623.9 million deficit after earning Rs 266.7 million the previous year.

The downturn signals a sector caught in a cycle of high claims, narrowing investment income, and rising regulatory capital requirements. The few insurers that grew profits appear to have benefited from stronger balance sheets, tighter underwriting, or better diversification—advantages others struggled to maintain in current market conditions.

“Companies had to manage claim payments themselves,” several CEOs said in interviews. “Under normal circumstances, reinsurers cover most liabilities. But reimbursements take time—especially  when claims arrive in such volume.”

At the center of the strain is the riot-insurance structure. Nepali insurers  retained up to 35% of the riot-related risk—an unusually high exposure—because such losses were historically modest. The remaining 65% went to reinsurers, who then dispersed it further through retrocession.

This system normally protects insurers  from catastrophic losses. But the scale of the September protests hit every layer at once. Since reinsurers must verify documents before releasing payouts, domestic insurers have been forced to shoulder immediate obligations, triggering a liquidity crunch exactly when they needed cash most.

“Insurance is fundamentally about pooling premiums, sharing risk, and compensating those who suffer losses,” said Prabhu CEO Bajracharya. “This year, claims fell under Riot, Strike, and Damage  (RSD). Fortunately, RSD coverage was mandatory; otherwise the impact would have been far worse.”

Floods in the Hills, Shockwaves in the Market

While the protests dominated headlines, the October floods delivered a second blow— especially to hydropower insurance. Hydropower has long been  one of the most profitable and stable lines for non-life insurers. Climate volatility, however, is changing that.

Sunil Ballav Pant, CEO of NLG Insurance, described a landscape that insurers  have struggled to adapt to. “Floods have become more frequent and more intense,” he said. “Fifteen years ago, they were  mostly confined to the Tarai. Now, we see devastating floods even in the hills—and that is where almost all hydropower projects are located there.”

When mountain floods hit hydropower projects, they do more than wash over access roads. They bring landslides, swollen rivers, broken intakes, damaged penstocks, and cascading losses  downstream. The October floods followed exactly this pattern: widespread, layered, difficult to verify, and expensive to manage.

“For insurers, there are only two ways to manage such risk: raise deductibles or raise premiums,” Pant said. “Hydropower is still one of Nepal’s most promising sectors, so insurers cannot withdraw. We must carry the risk responsibly.”

Despite the challenges, NLG Insurance moved quickly to settle claims. Out of Rs 600 million in claims filed with the company, Rs 50 million has already been paid.

“This was a one-off event,” Pant said. “The priority is quick settlement.”

The contrast with post-protest claims is striking. Flood damage follows predictable patterns. Riot damage, which includes charred vehicles, burned inventory, missing documents, is far more complex to verify.

A System That Must Keep Paying

The Nepal Insurance Authority (NIA), the regulatory body of the insurance sector, has spent the past few months acting as both a regulator and a stabilizing force. Executive Director and Spokesperson Sushildev Subedi called the dual shock as “an unusually large volume of claims at once,” but insisted the system remains fundamentally sound.

“Insurance is meant to absorb risk,” he said. “The fact that companies are paying claims does not mean they are in distress. They have reinsurance arrangements, and reinsurers further retrocede their exposure.”

To provide relief to protest-hit businesses, the NIA had instructed insurers to issue advance payments of up to 50% of estimated losses. Many complied. Nepal Reinsurance, the primary domestic reinsurer, also began releasing advance payouts as documents arrived.

But Subedi warned that non-life insurance is inherently slow. “Technical assessments and documentation take time,” he said. “A clearer picture will emerge only in the second quarter.” 

The numbers support his point. Even after settling more than Rs 3.68 billion in interim payments, total claims remain far from  resolved. Many cases, particularly those involving vehicles reduced to ashes, require time-consuming police reports, forensic assessments, and municipal verification.

Still, the sector has managed large-scale disasters before. The 2015 earthquakes triggered Rs 16.86 
billion in claims—a benchmark many CEOs cite as reassurance. “We successfully handled claims after the earthquakes,” said Birendra Baidawar Kshetri, Chairperson of the Nepal Insurers’ Association. “The industry is capable of managing risks of this magnitude. Profits may fall by up to 15% this year, but institutional stability is not at risk.”

Premiums Rise, Awareness Shifts

Despite the turbulence, the first quarter delivered a surprising story: premium growth. Non-life insurers collected Rs 12.65 billion in premiums, up from Rs 11.39  billion last year. Including micro-insurance companies, total premiums reached Rs 12.92 billion.

Sagarmatha Lumbini Insurance led with Rs 1.49 billion. Shikhar Insurance grew by a remarkable 
23.6%, while NLG Insurance expanded 36.35%. Even smaller insurers like Prabhu and National posted steady increases.

Partly of this growth is structural; Nepal’s insurance base expands slowly but consistently. But 
part of it is psychological. The riots and floods have begun to shift how the public thinks about 
insurance.

The most visible change is in property insurance.

As political unrest, climate disasters, and landslides followed one after another, more people 
began insuring their homes. Property insurance claims from the Gen Z protests alone reached Rs 
19.04 billion. Floods in Rasuwa and elsewhere added Rs 614.7 million. The Tinkune riot in the previous fiscal year contributed Rs 27.8  million.

While first-quarter numbers do not yet show  a dramatic surge, insurers say inquiries have risen 
sharply. “The impact won’t appear all at once,” said Prabhu CEO Bajracharya. “But because the 
government itself has begun purchasing property insurance, people now realize they should insure 
their own assets too.”

The finance ministry has already insured 20 government vehicles and begun valuing government assets for coverage. From next year, all government vehicles will be insured. Bringing government assets into the insurance pool could significantly expand the market and shift public perceptions of insurance from optional to essential.

A Liquidity Glut with Nowhere to Go

If claims define one side of the crisis, investments define the 
other. Non-life insurers have long parked most of their funds in fixed deposits. But the banking 
sector is now flush with liquidity. Deposits at Nepal Rastra Bank (NRB) have crossed Rs 800 
billion. Banks are discouraging large deposits. Interest rates have fallen from double digits to 
around 3.5%.

This is a devastating trend for insurers. A life insurance CEO put it bluntly: “Banks are refusing 
to accept our term deposits. There are few viable investment avenues elsewhere.” Under current 
rules, non-life insurers can invest in government bonds, listed shares, hydropower and 
infrastructure, and certain priority sectors. But appetite for these options is limited and returns 
are modest.

“We are compelled to focus more on claim payouts than investments,” said a deputy CEO of a large non-life company. “We now have no choice but to look for new avenues.”

Insurers have asked regulators to allow up to 10% of funds to be invested abroad, where returns are 
higher and markets more diversified. The request is still under discussion.

The Consumer Mindset Problem

Nepal’s insurance challenge is not only financial; it is cultural.
Even after multiple disasters, insurance penetration in Nepal is among the lowest in South Asia. Non-life insurance, in particular, remains underdeveloped, largely because many people view it as a “waste” if they do not make a claim.  

“People need to understand that insurance is a safeguard, not an income-generating tool,” said Bajracharya. “If no damage occurs, the premium shouldn’t be seen as  wasted; it is the cost of protection.”

The Gen Z protests exposed the consequences of this mindset. Most government buildings were  
uninsured, leaving taxpayers to bear the reconstruction cost. Private assets, however, were 
insured. The contrast between insured and uninsured damage has quietly become one of the most 
powerful arguments for expanding coverage. Kshetri of the Nepal Insurers’ Association believes the government must help shift behavior. “Insurance could be made mandatory for building approvals or completion certificates,” he said. “Tax incentives could also encourage wider coverage.”

A Glimpse of the Future

Despite current pressures, industry leaders remain cautiously optimistic.  
“Nepal’s economy does not remain static,” NLG’s Pant said. “Investment will return. Infrastructure 
development will resume. With renewed focus on growth, the insurance sector will move forward as well.”

The logic is straightforward: where banking expands, insurance follows. Banks are already exploring new sectors, new lending windows, and new infrastructure opportunities. Digital adoption is accelerating. Over 60% of insurers now use AI tools for underwriting, claims management, or customer service. At the same time, CEOs warn that over-reliance on AI could “limit creativity.” 

The future, then, lies in balance—between technology and judgment, risk and growth, domestic 
obligations and global insurance architecture. After the Fire, After the Flood Non-life insurers have paid more than Rs 25 billion for just five major incidents in the past decade: the 2015 earthquakes,
the Tinkune riot, COVID-19, the Rasuwa floods, the October 2023 disasters. In 2024/25 alone, they settled 101,713 claims worth Rs 16.62 billion.

Even if public attention shifts over time, the data tells a simple story: insurance works. And in 
moments of crisis, it works faster. The twin shocks of September and October have strained the system more than any event since the earthquakes. But they also showed why the system matters.

Insurance, often dismissed as paperwork or expense, became the bridge between destruction and 
recovery. It ensured that burned shops could reopen, flooded hydropower plants could rebuild, 
scorched vehicles could be replaced, and businesses would not collapse  under financial ruin. The 
question now is whether Nepal will internalize that lesson.

For years, insurers have warned that low coverage leaves the country dangerously exposed. This 
year’s events have written that warning in smoke and floodwater. The sector’s future resilience 
will depend on how the country responds—whether individuals choose protection over risk, whether the state insures its assets, whether pricing becomes more realistic and whether investment rules keep pace with a changing economy.

For now, insurers continue to pay. They are still sending surveyors to charred warehouses, still 
verifying flood-damaged turbines, still processing mountains of paperwork, and still issuing 
advances to keep businesses afloat. In the months ahead, reinsurance reimbursements will arrive, 
claims will settle, and balance sheets will stabilize. But the deeper transformation—a sector 
pushed into maturity by crisis—has only begun.

Nepal’s insurance industry has been tested, shaken, and stretched. But it has also proven something 
essential: even under unprecedented stress, the architecture of protection holds. And from that 
foundation, a more resilient future may yet be built.

(This report was originally published in December 2025 issue of New Business Age magazine.)